[MarketING] Slowly Weakening Negative Factors

KOSPI Continues Uptrend for Fourth Day
Impact of Eased US Tightening Concerns
Fed Semiannual Monetary Policy Report Suggests 25bp Hike in March

The KOSPI has continued its upward trend for the fourth consecutive day. This is interpreted as the KOSPI maintaining its strength due to somewhat eased concerns about tightening and expectations of China's economic recovery. There are forecasts that the negative factors that have limited the stock market's rise will gradually weaken.

KOSPI Strengthens for Fourth Day... Recovers to 2440 Level

As of 10:25 a.m. on the 6th, the KOSPI was at 2444.65, up 12.58 points (0.52%) from the previous session. The KOSDAQ rose 7.18 points (0.89%) to 809.60.

The easing of tightening concerns originating from the U.S. is seen as having a positive impact on the stock market. Ahead of the congressional hearing of Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), scheduled for the 7th and 8th, the semiannual monetary policy report stated that core Personal Consumption Expenditures (PCE) inflation and other measures remain well above the Fed's 2% target but are slowing down. The rise in commodity prices has significantly slowed as supply chain bottlenecks ease, and core service prices were high mainly due to housing, but new rents slowed in the second half of last year, suggesting that related inflation will decrease in the future. Regarding monetary policy, the Fed announced that it slowed the pace of policy tightening in December and January but deemed it sufficient and appropriate to bring inflation back to 2%. Sangyoung Seo, a researcher at Mirae Asset Securities, explained, "This monetary policy report suggests increasing downward pressure on inflation and indicates that the possibility of rate hikes above 50 basis points (1bp=0.01 percentage point) after March is low," adding, "After the report's release, downward pressure on U.S. Treasury yields increased."

With easing tightening concerns and falling Treasury yields, the U.S. stock market rose more than 1% across the three major indices on the 3rd (local time). The Dow Jones Industrial Average closed up 1.17%, the S&P 500 rose 1.61%, and the Nasdaq increased 1.97%. Researcher Seo said, "The U.S. stock market showed strength centered on tech stocks as the Fed's monetary policy report suggested a 25bp hike at the March Federal Open Market Committee (FOMC), reversing recent rapid rate increases, which is favorable for the Korean stock market."

After market adjustments, downside rigidity seems to have been secured. Ji-young Han, a researcher at Kiwoom Securities, analyzed, "The market appears to be digesting the shock from Fed tightening and interest rates to some extent. Looking at the market movements over the past one to two weeks, the direction of stock prices frequently changes depending on economic indicators and the stance of Fed officials. Despite this challenging environment, the 200-day moving averages of major indices such as the KOSPI (2403 points) and Nasdaq (11,430 points) are acting as support levels, which instills confidence and relief regarding downside rigidity."

Negative Factors Expected to Gradually Weaken

There are forecasts that the negative factors that have suppressed the stock market, such as tightening concerns, will gradually weaken.

Daejun Kim, a researcher at Korea Investment & Securities, said, "The February stock market showed a period-adjusted trend considering the overheating in January, but from this month, the negative factors preventing stock price rises will gradually weaken," adding, "Although concerns about monetary tightening remain, the likelihood of a severe tightening wave is low as some advanced countries have declared rate freezes, and the recovery we expect in China will begin in earnest through the Lianghui (National People's Congress and Chinese People's Political Consultative Conference)." He added, "China's recovery will help resolve the global demand shortage and reduce macroeconomic uncertainty."

There is an opinion that buying on dips is effective. Younghwan Kim, a researcher at NH Investment & Securities, said, "Recently, the KOSPI has faced high volatility, but there has been no sharp decline in the stock index," explaining, "Despite negative factors such as the Fed's hawkish policy stance, dollar strength, and valuation pressure due to downward earnings revisions, investors are also anticipating positive factors like slowing U.S. inflation and China's reopening and economic stimulus. Considering the direction of the economic cycle, time is likely to favor positive factors, so buying on stock price corrections is recommended."

Researcher Daejun Kim also said, "There is no need to avoid stock purchases amid improving macro conditions and easing tightening concerns," adding, "The possibility of falling below the yearly low is low, and with overheating concerns resolved, a buy-and-hold strategy is effective."

This content was produced with the assistance of AI translation services.